Honeypot Crypto scams can take two forms, but they both lead to the same result: your money will be lost if you fall for them. The most popular definition of honeypot Crypto requires immutable tokens. Another more manual approach is to transfer tokens to the wallet of a scammer. In the end, you won’t be able to withdraw the tokens. This article will teach you how to spot the two main kinds of honeypot Crypto frauds and stay out of their clutches. We will begin immediately.
Crypto Honeypots Scam Investors
Crypto honeypots are deceptive schemes that lure Crypto users but trick them into giving up their precious tokens, like ETH or SOL. Two variants of fraud rely on defective contracts to achieve their goals. One prevalent honeypot model is the sale of tokens on decentralized exchanges; these tokens are frequently meme coins. But the token has a feature that prevents its sale in the future by blacklisting purchasers.
The Federal Trade Commission believes that investors lose over $1 billion each year due to Crypto fraud. Unfortunately, most Crypto scams never make it into the public eye. The following is an inventory of Crypto scams and descriptions of each.
Meme Coins Used in Crypto Honeypot Scams
Because they are more prevalent, we will concentrate Crypto Honeypot Scams on meme coins that have a harmful function; however, another kind of honeypot involves delivering tokens to a scammer’s wallet. An explanation of the steps involved in Crypto Honeypot Scams honeypot fraud follows. Token Blacklists Used in Crypto Scams
As a first step, con artists create token smart contracts that have a blacklist function. The developer of the contract can then add wallet addresses that purchase tokens to a blacklist. A whitelist option enables sales to specific addresses, and smart contracts can automate the process overall. Placing a heavy levy on token sales is another typical strategy. The sale tax goes to the token’s maker.
Scammers Promote Fake Tokens on DEX
The con artist then uses a decentralized exchange (DEX) to release the token. Popular places to find liquid meme coins on decentralized exchanges include Dexscreener and Dextools. Victims who aren’t paying attention usually find honeypot tokens there. Promote it on social media or with DEX ads.
The con artists may use social media or Telegram to promote the new coin and lure in early adopters. Con artists often use a new X account, a Telegram group, and a basic website to create the illusion of a genuine coin. Once the con is over, the Twitter account and Telegram group vanish.
Cammers use Fake Charts to Lure Traders
The contract records and blacklists buyers’ wallet addresses as they exchange Ethereum (assuming an Ethereum-based marketplace) for the token. Members of the honeypot’s development team or those whose addresses are on the whitelist may be able to sell tokens to the liquidity pool. With sporadic pullbacks on a bullish chart, trading appears more natural. If this is missing, the graph will rise vertically.
A bullish chart serves as a lure. The chart indicates traders’ interest in capitalizing on what seems to be a significant opportunity for the upcoming upswing.
Scammers Drain Liquidity with Fake Tokens
Traders can exchange Ethereum for the other token in a liquidity pool, which DEX tokens utilize. As more individuals purchase tokens using Ethereum, the liquidity pool fills up with more Ethereum, increasing the market cap. Scammers, though, have a schedule. Auditing tools, such as GO+ Security, Quick Intel, and Token Sniffer, can scan token contracts. The token will eventually receive a honeypot designation.
After that, the con artists deplete the liquidity pool by selling their token hoard. Closing the liquidity pool and removing the ETH is another option. However, many traders know this; con artists may lock or destroy the token’s liquidity to make it appear real.
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